Goldman Sachs to Europe's rescue
More pieces are coming together. Day by day, the puzzle takes shape. Not a pretty picture.
An epic battle is taking place. Between the forces of鈥�
鈥nflation and deflation
鈥rowth and depression
鈥redit expansion and credit destruction
鈥entralization and de-centralization
鈥olitics and markets
鈥anaged paper money and gold
鈥anaged capitalism and the real thing
鈥ontrol and wealth
鈥ull and bear
鈥reed and fear
鈥ombies and real working people.
Yes, dear reader, it鈥檚 quite a fight. Better than Frazier vs. Ali. And who鈥檚 gonna win?
Europe faces its 鈥渢oughest hour since WWII,鈥� says Angela Merkel. What does she propose? More centralization. Centralization got Europe into this mess 鈥� harmonizing interest rates so that the Greeks and Italians could borrow more. And now, more centralization, she believes, will get it out.
Europe is taking no chances. This debt problem is a slugger. What to do about it?
Who knows more about debt problems than anyone else? The people who cause them, of course. So, under great pressure from the centralized European authorities, Greece got rid of its Papandreou, after the man had the gall to suggest letting democracy work. He wanted the people to vote on further austerity measures. It replaced him with Papademos鈥 guy who won鈥檛 make the mistake of deferring to the masses. After all, he was vice-president of the European Central Bank for years. And he taught at the Kennedy School of Government at Harvard.
Meanwhile, Italy too has been forced to get rid of its popular, but difficult to control, elected leader 鈥� Silvio Berlusconi. It has put in a company man. Yes, a company man. What company? Goldman Sachs, of course. The new fellow, Mario Monti is an ex-Goldman guy. And so is the new fellow at the European Central Bank, Mario Draghi. Monti was also an EU commissioner. Draghi ran the Bank of Italy as the nation built up one of the world鈥檚 biggest piles of debt. Then, when Italy鈥檚 cost of borrowing shot over 7%, in came Monti and Draghi.
It is almost as if they planned it that way. Who鈥檚 the biggest seller of debt on the planet? We don鈥檛 know鈥ut Goldman Sachs has to be up in the rankings somewhere. You鈥檒l recall it was Goldman that helped Greece structure its debt so that it could abide by the letter of its treaty engagements with Europe but totally thumb its nose at the spirit of it.
And now the debt has blown up鈥nd the Goldman boys are on the job, managing the mess they were so instrumental in creating.
What鈥檚 their solution? Oh come on鈥ear reader, you should know how this works by now. They propose more centralization, more management, more paper money, more debt, more inflation, more of everything you see on the right hand of our column above.
In other words, they believe that they know better than the people鈥r the market. They believe that their sanitized, homogenized, pasteurized Capitalism-in-a-Can works better than the real thing. Besides, they have a reason to believe it. This claptrap is the source of their power, status and money. Who knows, maybe their wives married them because it.
Rather than renounce the program on which their reputations, careers and fortunes depend, they try to shore it up. They open up the can and see what they can use. They promise to reform the system, not reject it.
But every reform 鈥� unless it merely dismantles one of their previous reforms 鈥� is a manipulation鈥 price fix鈥nd a scam. For example, they are proposing tax incentives to employers who hire youths and women. Good idea? Why not just drop some of the regulations and taxes that make it so expensive to hire youths and women in the first place? Nope. Then, they鈥檇 be giving up control. They鈥檇 be letting market forces decide who gets what. Here鈥檚 another proposed reform, as reported in The Financial Times: 鈥淲ider social safety net to help those made redundant (laid off) and encourage labor mobility.鈥� Typical rubbish. Spread a wider safety net and you discourage people from doing the hard work of finding new careers. But here鈥檚 one that will be popular with the managers: a 鈥渃rackdown on tax evasion.鈥� Are you kidding? Tax evasion is the only thing that keeps these economies going. People prevent their government from squandering their money. They spend it themselves. But the new Goldman guys won鈥檛 like it. They鈥檒l want to get their hands on as much of that 鈥榖lack money鈥� as possible.
Meanwhile, what鈥檚 going on in the USA? Alas, the US economy is the hands of the same sort of people鈥� The people who caused the mess鈥ho did not see it coming鈥nd who have not had a clue what to do about it. They鈥檙e still running US economic policy. These illustrious incompetents 鈥� such as Larry Summers of Obama鈥檚 National Economic Council and Tim Geithner, his Treasury Secretary 鈥� have proven that they wouldn鈥檛 know a Great Correction if it bit them on the behind..
So, they just keep adding more debt, more spending, more management, more 鈥榬eform鈥� measures, and more centralization.
Ultimately, the elite managers of Europe and America all went to the same schools (Harvard, Yale, MIT鈥�)鈥ll read the same newspapers and magazines (The Financial Times and The Economist)鈥ll worship the same gods (money and power)鈥ll speak the same language (mid-Atlantic English)鈥nd all want to control the world.
So far, they seem to be making great progress towards their objectives. They stuff the world with debt. It blows up. Then, they push out democratically-elected leaders鈥ain new power and authority鈥nd take charge of the rescue.
Of course, everything isn鈥檛 smooth sailing for the manipulators. There are storms to reckon with. The Telegraph reports that there is revolution in the air. From Ambrose Evans Pritchard:
Italy鈥檚 youth are turning. Watch the footage of students chanting 鈥渄emocracy鈥� and brandishing their 鈥�95 Theses鈥� of Wittenberg revolt as poet Van Rompuy tried to speak in Fiesole.
鈥淣o to Austerity,鈥� starts the Luther List: 鈥淭roika out of Greece鈥�, 鈥�IMF and ECB out of Italy, Ireland, and Portugal鈥�, it goes on.
鈥淭he EU has become ever less accountable to the people of Europe. The undemocratic structures have infiltrated the very structures of the Union,鈥� they said.
Behold 鈥渢he EU鈥檚 furious reaction to the Greek government鈥檚 effort to seek popular consent over the financial stranglehold imposed on the country. No longer are expressions of popular consent simply ignored, it is now impermissible to consult citizens.鈥�
鈥淭he game is getting dangerous,鈥� said Il Sole. Some suspect that the Berlusconi camp would not do too badly in snap elections, if allowed, campaigning against the 鈥渉ated euro and EU bosses鈥�. Is that why Brussels is now so afraid of Italy鈥檚 voters?
If Mr. Monti relies on the Left, how can he comply with EU orders to break the power of the trade unions and impose 鈥淎nglo-Saxon鈥� wage-bargaining? A large bloc in parliament will die in a ditch to defend Article 18 of the labour code.
Labour minister Maurizio Sacconi warned last week that careless handling of this issue threatens to unleash another round of terrorism in Italy. It is only nine years since Marco Biagi was assassinated by the Red Brigades for threatening the sacred cows of the Sindicati.
In 2009 the European Commission praised Italy鈥檚 鈥渟pectacular job creation鈥� and its 鈥済reater resilience to external shocks鈥�. In 2008 in said Italy was making 鈥済ood progress鈥� on the Lisbon reform agenda. In 2007 it said Italy鈥檚 debt sustainability risk was 鈥渂roadly in line鈥� with France and Germany.
Italy鈥檚 four sets of pension reforms were held out as a shining example. Finance minister Giulio Tremonti was feted in Brussels, lauded for his iron discipline and primary budget surplus.
And now these same EU bodies tell us that Italy鈥檚 failure to grasp the nettle of reform and tackle its debts is so egregious that Europe must step in to overthrow an elected government.
Regards,
Bill Bonner
听蹿辞谤 The Daily Reckoning
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